Three data points today:
#1: On that huge US Initial Claims for Unemployment Insurance report this morning:
- Remember that the headline number of 3,283,000 initial claims for unemployment insurance is a seasonally adjusted figure. Such adjustments are ordinarily prudent. US unemployment is deeply seasonal.
- The actual number was 2,898,450, which is still obviously very large. But the difference between the headline number and the real one is 384,550 – basically the same population as Cleveland OH.
- This variance between seasonally adjusted numbers and actual filings will be important as we go through the next few weeks of corporate/small business layoffs. The headline numbers will be clouded by irrelevant adjustment factors.
Bottom line: this is a distinction without much of a difference for now, but as we continue to track the effects of COVID-19 on the US labor market we will only use unadjusted data and we encourage you to do the same.
#2: Here are the latest Google US search volumes for “unemployment” over the last 7 days through Thursday evening:
What we see in that data:
- That Thursday morning peak came just as the initial claims data was being reported at 830am, but the geographic sources of those incremental searches were Michigan, Kentucky, Ohio, Nevada and New Hampshire, not New York or Washington DC. Real people, in other words, rather than finance professionals or politicians.
- We therefore assume that these searches were more likely to have come from Americans searching for information about unemployment insurance as it relates to the legislation passed by the Senate. Most of the related queries Google lists as associated with “unemployment” searches fit that description.
- Even factoring out that Thursday bump as not indicative of a sudden wave of layoffs this morning, Google searches for unemployment this week are still running 30-50% higher than last week.
Bottom line: next week’s initial claims number is likely to be at least as large as today’s report of 2.9 million (unadjusted) filings.
#3: The most recent mutual and exchange traded money flow data:
- The Investment Company Institute is always a week delayed with its fund flow information, but the latest report was out yesterday with data through March 18th.
- The aggregate numbers are simply staggering: $153 billion out of US listed mutual funds/ETFs for the week ending March 18th.
- Most of that ($114 billion) came out of long-term bond funds. Equity funds only saw $12 billion of redemptions, which is actually a pretty normal number (recall that equity funds have seen consistent outflows for years).
- Within just bond mutual funds (not ETFs), the largest outflows came from investment grade corporates (-$26 billion), global fixed income (-$19 billion), municipal bonds (-$19 billion) and high yield corporates (-$9 billion). There was not a single bond asset type that did not see +$1 billion net sales.
- To put the money flows out of bonds for the week ending March 18th into some historical perspective, that $114 billion per WEEK was more than 2x the entire MONTH of December 2018 (-$49 billion) when investors were last in serious liquidation mode.
Bottom line: as much as equity owners may think they are in COVID-19s crosshairs, it is really the fixed income market that has borne the brunt of the damage in terms of investor confidence. Against the numbers presented here, the Federal Reserve’s move to provide liquidity almost across the board in fixed income asset classes makes sense. In fact, they had no other choice.